Honorary Brazilian Consulate in Seattle

The WSJ reports German auto maker Volkswagen AG plans to invest 10 billion Brazilian reais ($4.25 billion) in its operations in Latin America’s largest nation in the 2014-2018 period to develop new vehicles and new technologies, the company said in a news release over the weekend.

Brazil is the fourth largest consumer market for Volkswagen behind China, Germany and U.S. The investment program for the period represents an increase in the previous investment plan for the period between 2012 and 2016, which totaled BRL8.7 billion.

“The investment program shows our confidence in Brazil and shows that we are advancing in the modernization of our products,” said Volkswagen do Brasil Chief Executive Thomas Schmall.

The massive investment planned by Volkswagen comes at a challenging time for the vehicle industry in Brazil.

Yearly vehicle sales fell for the first time in a decade in 2013, even as output in Brazil’s auto industry was temporarily boosted by government incentives aimed at strengthening local production and boosting exports.

Brazil vehicle sales declined last year to 3.77 million vehicles from a record of 3.8 million autos sold in 2012, according to auto-maker association Anfavea. Inflation’s erosion of consumer spending power, together with rising interest rates, a volatile currency and disappointing economic growth, crimped vehicle purchases.